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AfCFTA: Nigeria’s loss, Ethiopia’s gain

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AfCFTA: Nigeria’s loss could be Ethiopia’s gain

By Nsikan Ikpe

Could Nigeria’s continued stalling over signing the African Continental Free Trade Agreement, AfCFTA be an added gain situation for Ethiopia?

With a population of 105 million, Ethiopia is Africa’s second most populous nation. And in a world order where population size is the first factor in determining market size, the fact that Ethiopia is presently the most populous amidst the signed-up nations is indeed a factor that stands in favour of the Horn of African nation. This is because if Nigeria insists on not being in, Ethiopia would account for some 10 percent of the participating nations.

Unlike Nigeria however, it has a smaller economy. While Nigeria has a $390b economy, that of Ethiopia is only $75b. While Nigeria ranks as the biggest economy in the continent, Ethiopia stands at number 7 behind Kenya, Angola, Morocco, Algeria, Egypt and Nigeria’s closest rival, South Africa.

Analysts however say that with some of the traction recently gained by Ethiopia, even in the face of slumbering motion from leaders of currently better endowed economies like Angola, Algeria, South Africa and Nigeria, the gap is expected to close much faster in the next few years.

Part of the ground for optimism has to do with political leadership. On current form, Ethiopia boasts one of the most impressive and visionary leaderships in the continent. And it is playing out on different fronts.

Take for instance the recent tragedy involving a Boeing aircraft that was part of the fleet of the state-owned Ethiopian Airlines. On account of the airlines’ impressive track record over the years and the current perception of Ethiopia as a strongly reforming nation, a lot of the derogatory flak that in the past had been seen to greet such disasters in Africa from notably the West has been absent. In a few instances where they reared their heads, they were promptly shot down with the blame for the incident returning to sit very squarely on the shoulders of Boeing Aviation.

Ethiopia and AfCFTA

Ethiopia’s commendable role in the ongoing negotiations for the African Continental Free Trade Agreement has also been a plus and marks it out as a nation that knows what it wants and how to go about it. Its prime minister has signed, its parliament has ratified and the African Continental Free Trade Area (AfCFTA) instruments have also been deposited at the African Union headquarters, It has scored on all fronts and presently gone ahead to begin to lay the groundwork for its maximal exploitation of the treaty when it comes into force in the next few weeks.

In a recent media chat, Costantinos Bt. Costantinos, a very experienced African integration expert an former economic adviser to the AU and the United Nations Economic Commission for Africa (UN-ECA), affirmed that not only was Ethiopia on track, its recent boosting of its industrialization processes will further help position it to get much more from AfCFTA.

“With Ethiopia engaging in an ambitious industrialization drive, to make the country a light manufacturing hub in Africa by 2020, AfCFTA can make Ethiopian goods easily accessible to fellow African countries,” he stated.

Indeed, for the integration expert, this indeed is the deeper promise of AfCFTA, which is being touted as the continent’s best practical initiative this far to achieve enhanced productivity, boost prosperity and enhance the overall well-being of all of the peoples of the continent.

“African nations including Ethiopia can import goods from neighboring countries that are not readily available within their borders, creating strong intra-African trade linkages,” Costantinos said.

At the moment, a lot of cross-country and regional infrastructure developments in the areas of road, rail, energy and air travel are going on as part of a concerted drive to boost regional economic integration.

One such project is the 756km electrified rail line connecting landlocked Ethiopia to ports in Djibouti. There is also the road construction project to link Addis Ababa to the Kenyan capital, Nairobi as well as the 6,450 MW hydro dam that the landlocked Horn of Africa nation is building some 40 kilometers away from its border with Sudan.

Critical AU support

AU Commissioner for Trade and Industry Albert Muchanga who is in the centre of AfCFTA action is upbeat:

“With AfCFTA expected to be operational soon, the AU expects member states to start to liberalize trade relations with each other, reduce trade tariff among African countries and come up with mechanism to monitor the application of non-tariff barriers by some member states,” he says.

One such area of increased cooperation has to do with the labour-intensive textile sector. With countries like Ethiopia, Rwanda, Lesotho, Egypt and Nigeria working to boost their economies through, among others, a deeper exploitation of their textile and apparel sectors, the AU has already fingered it as a priority sector that will help AfCFTA’s overall goals.

“The textile and apparel sector has the potential to create mass employment opportunities for the continent’s youth and women, promote intra-African trade and integrate Africa into the global economic value chain,” says Muchanga. But part of the key for achieving this would be for private African textile and apparel sector manufacturers to look towards developing integrated joint ventures to increase the capacity of their production lines, thereby boosting economies of scale and production and marketing synergy.

And the future is here

It has indeed been a quite interesting journey. Since March 2018, when the first tranche of 44 African countries signed the initial agreement establishing the African Continental Free Trade Area in Kigali, Rwanda, the buzz has continued to deepen. In July of the same year, the signatories increased to 49 and peaked at 52 in February 2019. Only Nigeria, Eritrea and Benin Republic are holding out today.

When it comes fully on stream, AfCFTA will be about the most ambitious trade agreement put together in recent years in the world, aims to create a single market among the countries in the African continent. AfCFTA will bring together 55 African countries with a combined population of 1.4 billion people and combined GDP of more than 3.4 trillion U.S. dollars.

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